S&P: Property developers could face liquidity squeeze

Credit ratings agency S&P said that China’s property developers face an “increasingly severe” credit outlook, which could force them to slash prices and accept higher capital costs, Bloomberg reported. The organization, which performed stress tests on the country’s biggest property companies, said that while most could absorb a 10% drop in sales, a 30% fall could leave them in a liquidity bind. S&P added that Greentown China Holdings (3900.HK), Hopson Development Holdings (754.HK) and SRE Group (1207.HK) are the most at risk, because they are less able to refinance short-term debt. Tight liquidity conditions could encourage property developers to turn to alternative – and usually more expensive – means of raising capital, such as offshore bonds or trust companies. “The worst isn’t over for China’s real estate developers,” the S&P analysts wrote in their report.

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